Which of the following is true about revenue recognition under ASC 606?Multiple ChoiceConstruction contracts are typically broken into the various separate goods and services that are included in them for purposes of revenue recognition.The time value of money is considered when estimating all transaction prices.The realization principle guides revenue recognition.Collectibility of the receivable is considered when determining whether revenue can be recognized.

To determine which of the following statements is true about revenue recognition under ASC 606, we will analyze each option step by step:

Option A: Construction contracts are typically broken into the various separate goods and services that are included in them for purposes of revenue recognition. This statement is true. Under ASC 606, construction contracts are often segmented into separate performance obligations, which are the distinct goods or services included in the contract. Revenue recognition is then based on the satisfaction of each performance obligation.

Option B: The time value of money is considered when estimating all transaction prices. This statement is true. ASC 606 requires the consideration of the time value of money when estimating transaction prices. This means that the timing of cash flows and the potential impact of interest rates are taken into account when determining the amount of revenue to be recognized.

Option C: The realization principle guides revenue recognition. This statement is false. The realization principle, which was previously used in revenue recognition, is no longer the guiding principle under ASC 606. Instead, the core principle is that revenue should be recognized when control of goods or services is transferred to the customer and the entity is entitled to payment.

Option D: Collectibility of the receivable is considered when determining whether revenue can be recognized. This statement is true. ASC 606 requires consideration of the collectibility of the receivable when determining whether revenue can be recognized. If collectibility is not reasonably assured, revenue recognition may be delayed until collectibility becomes reasonably assured.

In summary, the correct statements about revenue recognition under ASC 606 are:

• Construction contracts are typically broken into the various separate goods and services that are included in them for purposes of revenue recognition.
• The time value of money is considered when estimating all transaction prices.
• Collectibility of the receivable is considered when determining whether revenue can be recognized.